1 00:00:04,110 --> 00:00:07,080 Sean Aylmer: Welcome to the Fear and Greed daily interview. I'm Sean Aylmer. 2 00:00:07,410 --> 00:00:10,020 Sean Aylmer: Superannuation is a hot topic right now with plenty of 3 00:00:10,020 --> 00:00:13,230 Sean Aylmer: talk of super reform in the not- too- distant future, 4 00:00:13,470 --> 00:00:15,510 Sean Aylmer: but one part of the sector that we haven't talked 5 00:00:15,510 --> 00:00:19,320 Sean Aylmer: a great deal about is self- managed super funds (SMSFs). Remember, 6 00:00:19,320 --> 00:00:22,650 Sean Aylmer: this discussion doesn't take into account your personal circumstances. You 7 00:00:22,650 --> 00:00:27,630 Sean Aylmer: should seek professional advice before making any investment decisions. Class, C- L- A-S- 8 00:00:28,290 --> 00:00:31,170 Sean Aylmer: S is an Australian accounting technology company with a real 9 00:00:31,170 --> 00:00:34,950 Sean Aylmer: focus on self- managed super funds. Tim Steele is the 10 00:00:34,950 --> 00:00:37,590 Sean Aylmer: CEO of Class. Tim, welcome to Fear and Greed. 11 00:00:38,010 --> 00:00:39,720 Tim Steele: Sean, delighted to be here. Thank you for having me. 12 00:00:40,170 --> 00:00:42,930 Sean Aylmer: So, just tell us a little bit about Class before 13 00:00:42,930 --> 00:00:45,960 Sean Aylmer: we get into more general conversation about the super sector 14 00:00:45,960 --> 00:00:49,620 Sean Aylmer: and SMSF. What does Class do? How many funds do 15 00:00:49,620 --> 00:00:50,220 Sean Aylmer: you support? 16 00:00:50,820 --> 00:00:54,750 Tim Steele: Class is a technology provider to the accounting and SMSF 17 00:00:54,750 --> 00:00:58,770 Tim Steele: administration sector and was born out of a desire to 18 00:00:58,800 --> 00:01:01,560 Tim Steele: create a tool to support accounts and administrators to more 19 00:01:01,560 --> 00:01:06,240 Tim Steele: efficiently administer SMSF. It has gone on to include additional 20 00:01:06,240 --> 00:01:09,240 Tim Steele: products related to the administrations of trusts and reporting for 21 00:01:09,240 --> 00:01:12,240 Tim Steele: portfolios. And we have subsequently, sort of in more recent 22 00:01:12,240 --> 00:01:15,569 Tim Steele: years acquired a business that helps accountants with their corporate 23 00:01:15,569 --> 00:01:19,350 Tim Steele: compliance and entity management with asset dealings as well as 24 00:01:19,350 --> 00:01:20,130 Tim Steele: legal documents. 25 00:01:20,430 --> 00:01:22,290 Sean Aylmer: Okay. So, for the purposes today we're going to be 26 00:01:22,290 --> 00:01:27,600 Sean Aylmer: talking about SMSFs primarily. Where is that sector up to? 27 00:01:28,350 --> 00:01:30,030 Sean Aylmer: There's always been plenty of talk about it and then in 28 00:01:30,030 --> 00:01:33,179 Sean Aylmer: recent years there has been discussions about how much money you should or shouldn't 29 00:01:33,180 --> 00:01:38,130 Sean Aylmer: have before you ran your own superannuation fund. How big 30 00:01:38,130 --> 00:01:40,440 Sean Aylmer: is it? Is it growing? Just kind of tell me 31 00:01:40,680 --> 00:01:42,030 Sean Aylmer: where that sector's up to? 32 00:01:42,959 --> 00:01:45,300 Tim Steele: Yeah, so we've got some data. Fortunately, the industry's very 33 00:01:45,300 --> 00:01:47,670 Tim Steele: good at publishing data regularly and we get data from 34 00:01:48,120 --> 00:01:51,570 Tim Steele: the ATO as well as our own analysis. So, as 35 00:01:51,570 --> 00:01:54,450 Tim Steele: of the end of September based on ATO data, there 36 00:01:54,450 --> 00:02:02,610 Tim Steele: were actually 603, 449, SMSFs in Australia representing about 1. 1 37 00:02:02,670 --> 00:02:08,669 Tim Steele: million members and about 26% of all superannuation assets are 38 00:02:08,669 --> 00:02:12,450 Tim Steele: in SMSF. In terms of growth, that has been really 39 00:02:12,450 --> 00:02:15,090 Tim Steele: interesting, and we saw obviously quite a large spike through 40 00:02:15,389 --> 00:02:19,560 Tim Steele: the COVID period in establishment of SMSF and I think 41 00:02:19,560 --> 00:02:23,309 Tim Steele: that was probably driven by people's heightened interest in super 42 00:02:23,310 --> 00:02:25,740 Tim Steele: and early release may have played a part of that. 43 00:02:26,070 --> 00:02:28,980 Tim Steele: When we look at net establishments, which is the outcome 44 00:02:28,980 --> 00:02:34,770 Tim Steele: of obviously establishments and windups doubled over the certainly up 45 00:02:34,770 --> 00:02:38,639 Tim Steele: until 30 June, 2022 from just under 10,000 to over 20, 46 00:02:38,639 --> 00:02:42,420 Tim Steele: 000 and the year prior it was just under 5, 000. 47 00:02:42,870 --> 00:02:44,399 Tim Steele: And so, it's doubled again. 48 00:02:44,669 --> 00:02:45,269 Sean Aylmer: So, why is that? 49 00:02:46,590 --> 00:02:50,490 Tim Steele: Well again, we think that people are keeping SMSF longer. 50 00:02:50,490 --> 00:02:54,120 Tim Steele: The actual establishment rate, whilst it did spike temporarily isn't 51 00:02:54,120 --> 00:02:57,600 Tim Steele: materially greater than the average we've seen over time, which 52 00:02:57,600 --> 00:03:02,070 Tim Steele: is about 20,000 a year of SMFS's established. What has 53 00:03:02,400 --> 00:03:04,560 Tim Steele: sort of driven, I think the net establishment rate is 54 00:03:04,560 --> 00:03:08,010 Tim Steele: a 53% reduction in the number of funds that were 55 00:03:08,010 --> 00:03:10,950 Tim Steele: wound up certainly in 2022. So, if you think about 56 00:03:10,950 --> 00:03:15,000 Tim Steele: the year 2020 was about 5, 000, 2021 there were about 10,000 57 00:03:15,000 --> 00:03:19,560 Tim Steele: net establishments and just over 20,000 in 2022 that was really driven 58 00:03:19,560 --> 00:03:21,900 Tim Steele: by the reduction in funds being wound up. 59 00:03:22,440 --> 00:03:25,230 Sean Aylmer: Okay. I think a Self Managed Super Fund is a very... It's quite a 60 00:03:25,230 --> 00:03:28,260 Sean Aylmer: serious business. I mean I had one, I established it, 61 00:03:28,889 --> 00:03:32,850 Sean Aylmer: oh maybe it's 15 years ago and I must say 62 00:03:32,850 --> 00:03:34,680 Sean Aylmer: I wound it up and went to one of the 63 00:03:34,680 --> 00:03:39,030 Sean Aylmer: larger funds simply because I wasn't keeping an eye on it. 64 00:03:39,030 --> 00:03:41,160 Sean Aylmer: And this is a while ago I did. It is 65 00:03:41,160 --> 00:03:43,620 Sean Aylmer: very much if you have a self- managed Superfund, it 66 00:03:43,620 --> 00:03:46,110 Sean Aylmer: isn't a set and forget play. It's something you have 67 00:03:46,110 --> 00:03:46,920 Sean Aylmer: to keep an eye on. 68 00:03:47,400 --> 00:03:50,670 Tim Steele: Absolutely, Sean. And look, SMSFs aren't for everyone. I think 69 00:03:50,670 --> 00:03:53,340 Tim Steele: that's the really important point. I mean I think our 70 00:03:53,340 --> 00:03:56,400 Tim Steele: view from the broader sector's perspective is we'd certainly more 71 00:03:56,400 --> 00:03:59,730 Tim Steele: people to be aware of the potential benefits as well 72 00:03:59,730 --> 00:04:02,940 Tim Steele: as the work required to actually maintain and ensure that 73 00:04:02,940 --> 00:04:06,240 Tim Steele: your SMSF is compliant. But that is perhaps a common 74 00:04:06,240 --> 00:04:08,550 Tim Steele: reason why people might say, " Look, actually it's more work 75 00:04:08,550 --> 00:04:12,480 Tim Steele: than I expected and actually given my circumstance that this 76 00:04:12,480 --> 00:04:15,750 Tim Steele: stage in my life there might be better alternatives for 77 00:04:15,750 --> 00:04:18,659 Tim Steele: you." We have a view that SMSF's, again for the 78 00:04:18,660 --> 00:04:21,479 Tim Steele: right people can support you and grow with you as 79 00:04:21,480 --> 00:04:25,110 Tim Steele: the complexity of your life and needs evolve over time. 80 00:04:25,529 --> 00:04:31,470 Tim Steele: Interestingly, we look at our data and we publish an annual benchmark report around every September 81 00:04:31,470 --> 00:04:34,710 Tim Steele: that looks at our data. We've got about 30% of 82 00:04:34,710 --> 00:04:39,420 Tim Steele: the market, so just over 180,000 SMSF that are administered on 83 00:04:39,420 --> 00:04:43,440 Tim Steele: our software. So, it's a statistically significant reasonable sample size 84 00:04:43,440 --> 00:04:47,070 Tim Steele: I get, and we rerun that data and actually released 85 00:04:47,070 --> 00:04:51,210 Tim Steele: that at a recent self- managed Superfund Association conference and 86 00:04:51,510 --> 00:04:54,330 Tim Steele: the driver of the establishments is sort of the millennials. 87 00:04:54,330 --> 00:04:58,320 Tim Steele: So, we're seeing 38% of SMSF's being established in the 88 00:04:58,320 --> 00:05:02,429 Tim Steele: market today based on our data are in fact millennials, 36% 89 00:05:02,670 --> 00:05:04,770 Tim Steele: sort of Gen X are the 45 to 54 year 90 00:05:04,770 --> 00:05:09,930 Tim Steele: olds, and so 25% are 55 to 74 year olds. Now, that's pretty 91 00:05:09,930 --> 00:05:12,750 Tim Steele: consistent and in fact the ATO data as at the end 92 00:05:12,750 --> 00:05:18,359 Tim Steele: of September actually showed that 44% of new establishments were 93 00:05:18,450 --> 00:05:21,510 Tim Steele: millennials. So slightly higher on average obviously than our data 94 00:05:21,510 --> 00:05:24,810 Tim Steele: over a slightly different period. So, it does show that 95 00:05:24,810 --> 00:05:28,529 Tim Steele: people are younger and younger are considering SMSFs, but they 96 00:05:28,529 --> 00:05:31,500 Tim Steele: obviously need to do so understanding what it means and 97 00:05:31,500 --> 00:05:33,719 Tim Steele: their circumstances and that they've got the right help support 98 00:05:33,720 --> 00:05:35,880 Tim Steele: and we would strongly encourage them to get advice. 99 00:05:36,150 --> 00:05:39,570 Sean Aylmer: Yeah, I mean definitely when you described why I wound 100 00:05:40,290 --> 00:05:42,539 Sean Aylmer: mine up perfectly. It was just a time in life that 101 00:05:42,540 --> 00:05:45,240 Sean Aylmer: didn't suit me, but certainly an advisor was really critical 102 00:05:45,240 --> 00:05:48,150 Sean Aylmer: in that process. What are the advantages of having an SMSF? 103 00:05:48,150 --> 00:05:51,000 Sean Aylmer: Why would millennials benefit from opening one up? 104 00:05:51,870 --> 00:05:54,330 Tim Steele: Well, I think I touched on it briefly, Sean, is 105 00:05:54,330 --> 00:05:56,339 Tim Steele: that we think it can grow with them as their 106 00:05:56,339 --> 00:05:58,830 Tim Steele: complexities change. It means if you're younger, you can get 107 00:05:58,830 --> 00:06:02,070 Tim Steele: insurance earlier and you don't have to move your insurance 108 00:06:02,070 --> 00:06:06,660 Tim Steele: remains in your SMSF fund. There may be certain investment options 109 00:06:07,050 --> 00:06:09,270 Tim Steele: that you're available to you inside an SMSF that are 110 00:06:09,270 --> 00:06:12,089 Tim Steele: not available to you inside a public offer or APRA 111 00:06:12,089 --> 00:06:15,900 Tim Steele: regulated fund with property being perhaps the most obvious one. 112 00:06:16,380 --> 00:06:20,100 Tim Steele: And look, we really think that it gives people a sense 113 00:06:20,100 --> 00:06:23,550 Tim Steele: of control over time and the flexibility as needed and 114 00:06:23,550 --> 00:06:26,430 Tim Steele: the complexity of their life changes. It doesn't mean that 115 00:06:26,430 --> 00:06:29,969 Tim Steele: people necessarily want to exercise that control all the time. 116 00:06:29,970 --> 00:06:33,390 Tim Steele: We still see a reasonable percentage of assets going into 117 00:06:33,480 --> 00:06:37,800 Tim Steele: ETFs inside SMSFs and they should obviously be based on 118 00:06:37,800 --> 00:06:41,880 Tim Steele: advice reasonably diversified or appropriately diversified. But I think this 119 00:06:41,880 --> 00:06:46,349 Tim Steele: sense of control that as needed, they can adjust over time. 120 00:06:46,350 --> 00:06:49,320 Tim Steele: And I think someone actually sort of shared this anecdote 121 00:06:49,380 --> 00:06:53,039 Tim Steele: with me at that recently referenced SMSFA conference. The difference 122 00:06:53,040 --> 00:06:55,440 Tim Steele: perhaps is a little bit like taking the bus to 123 00:06:55,440 --> 00:06:58,710 Tim Steele: work every day. If you're taking the same route that 124 00:06:58,710 --> 00:07:00,510 Tim Steele: you can hop on and off, you can get on the bus and 125 00:07:00,510 --> 00:07:03,870 Tim Steele: just take that to work is quite an efficient, effective way to 126 00:07:03,870 --> 00:07:08,070 Tim Steele: do that and will achieve its objective if perhaps you, 127 00:07:08,130 --> 00:07:10,020 Tim Steele: you're not certain exactly where you might want to get off, 128 00:07:10,020 --> 00:07:11,520 Tim Steele: if you might want to stop for a cup of coffee, 129 00:07:12,060 --> 00:07:15,000 Tim Steele: maybe it makes sense to drive. And so, perhaps an 130 00:07:15,000 --> 00:07:18,300 Tim Steele: anecdote that might resonate with your listeners is we might 131 00:07:18,300 --> 00:07:23,130 Tim Steele: see a comparison where superannuation funds might traditionally be thought 132 00:07:23,130 --> 00:07:26,700 Tim Steele: of as perhaps the taking the bus very effective and 133 00:07:26,700 --> 00:07:29,880 Tim Steele: that perhaps taking the car is sort of the SMSF comparison. 134 00:07:30,240 --> 00:07:32,430 Sean Aylmer: Stay with me Tim, be back in a minute. 135 00:07:38,160 --> 00:07:41,460 Sean Aylmer: My guest this morning is Tim Steele, chief executive officer 136 00:07:41,670 --> 00:07:44,220 Sean Aylmer: of Class. So, there's been lots of talk in the 137 00:07:44,220 --> 00:07:48,330 Sean Aylmer: past couple of weeks in Canberra about potential changes to 138 00:07:48,330 --> 00:07:52,050 Sean Aylmer: superannuation. Nothing is set in stone and Prime Minister Anthony 139 00:07:52,050 --> 00:07:58,020 Sean Aylmer: Albanese, Federal Treasurer Jim Chalmers have hinted though at the 140 00:07:58,050 --> 00:08:01,290 Sean Aylmer: sustainability in terms of tax rates and that because obviously 141 00:08:01,290 --> 00:08:04,860 Sean Aylmer: super is very tax effective investing. 3 million seems to 142 00:08:04,860 --> 00:08:07,380 Sean Aylmer: be this mark which keeps coming up where the government 143 00:08:07,800 --> 00:08:13,380 Sean Aylmer: may make changes to tax rates or tax treatment of 144 00:08:13,380 --> 00:08:16,830 Sean Aylmer: people with high superannuation accounts. I would imagine there'd be 145 00:08:16,830 --> 00:08:19,260 Sean Aylmer: a few self- managed super funds that would fit into 146 00:08:19,260 --> 00:08:19,860 Sean Aylmer: that bracket. 147 00:08:20,460 --> 00:08:23,700 Tim Steele: Yes, and look, I don't think we know quite where 148 00:08:23,700 --> 00:08:27,750 Tim Steele: the threshold may be and it's certainly true as you've described 149 00:08:27,750 --> 00:08:32,100 Tim Steele: when the government's spoken about equitable and sustainable that you 150 00:08:32,100 --> 00:08:34,470 Tim Steele: know, can't help but conclude that they're paving the way 151 00:08:34,830 --> 00:08:38,250 Tim Steele: for the potential introduction of a cap. I think there's 152 00:08:38,250 --> 00:08:40,140 Tim Steele: a lot of work and thought to go into how 153 00:08:40,140 --> 00:08:43,979 Tim Steele: that would practically work and whether whatever the threshold may 154 00:08:43,980 --> 00:08:46,530 Tim Steele: end up being shown, whether it's 3 million, five minute 155 00:08:46,530 --> 00:08:48,540 Tim Steele: or perhaps not at all, but certainly if there was, 156 00:08:48,600 --> 00:08:51,359 Tim Steele: is a cap then are a number of practical issues 157 00:08:51,360 --> 00:08:54,450 Tim Steele: that need to be considered. And certainly for an SMSF point of view, 158 00:08:54,809 --> 00:08:59,370 Tim Steele: there are a percentage of members above that threshold, and 159 00:08:59,370 --> 00:09:02,700 Tim Steele: I can understand why the government's considering it, but we 160 00:09:02,700 --> 00:09:05,040 Tim Steele: don't yet know how that's going to play out and 161 00:09:05,040 --> 00:09:07,740 Tim Steele: what that'll mean. The challenges, for example, is if you 162 00:09:07,740 --> 00:09:11,640 Tim Steele: had a higher value asset inside your SMSF that might 163 00:09:11,640 --> 00:09:14,520 Tim Steele: in fact exceed whatever cap that was, how would you 164 00:09:14,640 --> 00:09:16,950 Tim Steele: deal with that asset if it was a hard cap? 165 00:09:17,670 --> 00:09:19,830 Sean Aylmer: Yes, I mean I think the demo will definitely be 166 00:09:19,830 --> 00:09:21,809 Sean Aylmer: in the detail. How do people end up with that 167 00:09:21,809 --> 00:09:24,510 Sean Aylmer: much money though in their super account? 168 00:09:24,900 --> 00:09:27,480 Tim Steele: Well, I think this is, and I should have probably made this point, 169 00:09:27,870 --> 00:09:30,870 Tim Steele: we sort of think there's a natural conclusion to the 170 00:09:30,870 --> 00:09:33,480 Tim Steele: current issue where you have these mega funds and it's 171 00:09:33,480 --> 00:09:36,300 Tim Steele: because the same restrictions that exist today or caps that 172 00:09:36,300 --> 00:09:40,260 Tim Steele: exist today, both concessional and non- concessional didn't always exist. 173 00:09:40,260 --> 00:09:42,930 Tim Steele: And so, there is a natural end to these mega funds where 174 00:09:43,559 --> 00:09:46,710 Tim Steele: it'll be difficult. I think with the current cap of 1. 175 00:09:47,130 --> 00:09:51,630 Tim Steele: 7 going to 1. 9 million as a contribution, it 176 00:09:51,630 --> 00:09:54,150 Tim Steele: will be much harder for people to get to a 177 00:09:54,150 --> 00:09:57,449 Tim Steele: point where they've got a balance above 5 million, for 178 00:09:57,450 --> 00:10:00,960 Tim Steele: example. So, it's really a short- term issue that I 179 00:10:00,960 --> 00:10:03,689 Tim Steele: think from a policy point of view the government is 180 00:10:04,020 --> 00:10:06,870 Tim Steele: seeking to deal with in considering a potential cap. 181 00:10:07,740 --> 00:10:13,890 Sean Aylmer: Okay. Going forward then in parking the cap rate, what 182 00:10:13,890 --> 00:10:17,070 Sean Aylmer: else does government need to do to improve our retirement 183 00:10:17,070 --> 00:10:22,559 Sean Aylmer: incomes system? We've had the retirement income covenant last year 184 00:10:22,559 --> 00:10:25,020 Sean Aylmer: and that's kind of, I suppose, a policy looks at 185 00:10:25,020 --> 00:10:29,520 Sean Aylmer: how people think about superannuation, particularly in the decumulation stage. 186 00:10:29,850 --> 00:10:33,210 Sean Aylmer: Are the settings right in terms of our super system 187 00:10:33,210 --> 00:10:37,050 Sean Aylmer: at the moment and then post 65, post retirement? 188 00:10:37,800 --> 00:10:40,949 Tim Steele: Oh, look, there's probably a couple of comments I can make. Firstly, 189 00:10:41,040 --> 00:10:44,010 Tim Steele: I think we have a superannuation system that is the 190 00:10:44,010 --> 00:10:49,080 Tim Steele: envy of the world. We tend to be, maybe it's the 191 00:10:49,080 --> 00:10:50,761 Tim Steele: Australian way, we tend to be a little bit self- critical. 192 00:10:50,761 --> 00:10:54,420 Sean Aylmer: No. No, Tim. Please! Yes. 193 00:10:54,990 --> 00:10:57,449 Tim Steele: I know, Sean. Knock you over with a feather! But look I know 194 00:10:57,570 --> 00:10:58,979 Tim Steele: and so we tend to be a bit self- critical, 195 00:10:59,730 --> 00:11:02,970 Tim Steele: and it has continued to grow and I think served 196 00:11:02,970 --> 00:11:08,010 Tim Steele: its purpose, which is to help offset the dependence that 197 00:11:08,309 --> 00:11:11,490 Tim Steele: aging Australians have on the age pension. And so, it 198 00:11:11,490 --> 00:11:14,790 Tim Steele: is serving its purpose and I think the government and 199 00:11:14,790 --> 00:11:17,040 Tim Steele: policy and treasury continue to look at ways of making 200 00:11:17,040 --> 00:11:21,270 Tim Steele: it more efficient. And so, I think super has served 201 00:11:21,270 --> 00:11:26,040 Tim Steele: its purpose. It's done exceptionally well. So, I think continuing to think with it, 202 00:11:26,670 --> 00:11:29,370 Tim Steele: I understand the attention and potentially from a tax point 203 00:11:29,370 --> 00:11:32,280 Tim Steele: of view why they would do that, but the government has it is, 204 00:11:32,790 --> 00:11:33,390 Tim Steele: it's working. 205 00:11:34,230 --> 00:11:36,330 Sean Aylmer: Tim, thank you very much for talking to Fear and Greed. 206 00:11:36,990 --> 00:11:37,860 Tim Steele: Thank you very much, Sean. 207 00:11:38,550 --> 00:11:41,250 Sean Aylmer: That was Tim Steele, CEO of Class. This is the 208 00:11:41,250 --> 00:11:43,770 Sean Aylmer: Fear and Greed daily interview. Remember, this information is general 209 00:11:43,770 --> 00:11:46,830 Sean Aylmer: in nature. You should always seek professional advice before making 210 00:11:46,830 --> 00:11:49,229 Sean Aylmer: any investment decisions. Join us every morning for the full 211 00:11:49,230 --> 00:11:53,190 Sean Aylmer: episode of Fear and Greed. Australia's most popular business podcast. 212 00:11:53,250 --> 00:11:54,839 Sean Aylmer: I'm Sean Aylmer. Enjoy your day.